Gold tests critical 200-DMA near $1236

The selling pressure on gold remains unabated in the late US afternoon, dragging the XAU/USD pair to its lowest level since March 21 at $1235.76. The pair seems to have found a short-term support near the critical 200-DMA and is now trading at $1238.45, losing 1.45% on the day.

The improved risk sentiment following the FOMC statement continues to weigh on the traditional safe-haven gold while keeping the demand for the greenback high. The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, holds on to its daily gains near 99.20 with a daily rise of 0.45%.

The FOMC monetary policy statement today suggested that the bank was on track for two more rate hikes in 2017 as it didn't make any significant changes to its March statement, where it explained the reason behind the decision to raise rates by 25 bps. The higher risk appetite can be seen on the rising Treasury yields as well. As of writing, the 10-year U.S. T-bond yield was up more than 1% at 2.322%, helping the DXY preserve its bullish momentum. 

• Comparison Between May and March FOMC Statements - Nomura

The next important event for the pair will be Friday's NFP report. Before that, the risk sentiment and the DXY could remain as the main drivers of the price action.

Technical outlook

A daily close below $1236 (200-DMA), could open the door towards $1227 (Mar. 21 low) and $1220 (Mar. 16 low). To the upside, $1250 (50-DMA) could be seen as the first technical resistance ahead of $1260 (horizontal level) and $1272 (20-DMA).

• Gold intermarket: DXY/US yields drive gold down towards previous US data lows